US stocks drop after best rally of the year

New York, March 25 (DPA) US stocks fell sharply Tuesday, one day after posting their biggest gains of the year, as the US administration sought new powers to control failing financial firms. Banking shares, which gained some 18 percent Monday, led the market decline amid speculation that Congress will no longer back more money for struggling Wall Street institutions.

President Barack Obama’s administration asked for broad new powers to take over non-banking institutions in the wake of the controversial bail-out of insurance giant American International Group Inc.

Treasury Secretary Timothy Geithner said government control of AIG would have helped it lead an “orderly” reorganisation and prevented the firm from doling out $165 million in retention bonuses last week, which have sparked a furore among the public and legislators.

US lawmakers made clear that the AIG scandal had made it harder for Congress to approve another round of emergency funds for Wall Street banks, which are blamed for leading the US into financial crisis but remain critical to the wider economy.

Stocks Monday posted their biggest rally since November after Geithner unveiled the details of a long-awaited $1-trillion plan to take toxic mortgage assets off the balance sheets of US banks.

The blue-chip Dow Jones Industrial Average dropped 115.65 points, or 1.5 percent, to 7,660.21, after surging nearly 500 points on Monday. The broader Standard & Poor’s 500 Index was down 16.88 points, or 2.1 percent, to 806.04. The technology-heavy Nasdaq

Composite Index fell 39.29 points, or 2.5 percent, to close at 1,516.48.

The US currency climbed against the euro to 74.25 euro cents from 73.33 euro cents Monday, and the dollar climbed to 97.9 Japanese yen from 97.06 Japanese yen.